What is a Discretionary Commission Arrangement (DCA)?

What is a Discretionary Commission Arrangement (DCA)?

In simple terms, a DCA allowed car dealerships and brokers to set or adjust the interest rate on a customer's car finance agreement. The higher the interest rate they set, the more commission they earned from the lender. This created a conflict of interest where the dealer's profit motive could be put ahead of the customer's best interests.

Why were DCAs Controversial?

• Lack of Transparency: Customers were often unaware that the dealer had the power to influence their interest rate, leading to a lack of trust and potential overcharging.

• Potential for Consumer Harm: Dealers were incentivized to inflate interest rates to maximize their commission, meaning customers could end up paying significantly more for their car finance.

Which Lenders Used DCAs?

Many major car finance lenders in the UK utilized DCAs before the FCA banned them in January 2021. Here are some of the lenders that have publicly acknowledged using DCAs:

• Barclays Partner Finance: https://www.barclays.co.uk/loans/point-of-sale-finance/

• Black Horse Finance: https://www.blackhorse.co.uk/

• Close Brothers Motor Finance: https://www.closemotorfinance.co.uk/

• Moneyway: https://www.moneyway.co.uk/

• Santander Consumer Finance: https://www.santanderconsumer.co.uk/

• Advantage Finance: https://www.advantage-finance.co.uk/

• First Response Finance: https://www.firstresponsefinance.co.uk/

• MotoNovo Finance: https://www.motonovo.com/

Which Lenders Didn't Use DCAs?

While it's difficult to provide a definitive list of lenders who never used DCAs, several companies have publicly stated that they did not utilize this practice. These include:

• Admiral: https://www.admiral.com/loans/car-finance/car-loans

• Billing Finance: https://www.billingfinance.co.uk/

• Burnley Savings & Loans: https://www.burnleysavingsandloans.co.uk/

• Carmoola: https://www.carmoola.co.uk/

• Lendable: https://www.lendable.co.uk/

• Oodle Car Finance: https://www.oodlecarfinance.com/

• Oplo: [invalid URL removed]

• RateSetter: https://www.ratesetter.com/

• Tandem: https://www.tandem.co.uk/

• 1st Stop Finance: https://www.1ststopfinance.co.uk/

Important Notes:

• Ongoing FCA Review: The FCA is conducting a comprehensive review of the historical use of DCAs, which may reveal further information about which lenders used them.

• Consumer Action: If you believe you were overcharged due to a DCA, you can complain to the lender or escalate your complaint to the Financial Ombudsman Service (FOS).

References:

• FCA's Finalised Guidance on DCAs: https://www.fca.org.uk/publication/finalised-guidance/fg21-1.pdf

• FCA's webpage on car finance complaints: https://www.fca.org.uk/consumers/car-finance-complaints

• Competition & Markets Authority's (CMA) report on motor finance: [invalid URL removed]

It's important to stay informed about DCAs and their potential impact on car finance agreements. If you have any concerns, don't hesitate to contact your lender or seek advice from the FOS or a consumer rights organization.